Let’s Get Intimate with Your Business
The most intimate aspect of any business is the finances and there's a deep vulnerability exposed when you examine those numbers. Ignoring your business’ financial health is an unhealthy practice and may lead to a loss of profits or worse. The challenge this month is to review your three most important financial statements so that you are deeply knowledgeable about the financial state of your business.
“Most people don’t want to share their business finances because it’s too intimate and it makes them feel really vulnerable. But it’s an important key to the overall health of their business.”
Cash flow statement: Your cash flow statement tracks all the incoming cash your business receives as well as all the outgoing cash necessary to run it. In your cash flow statements list all streams of income, including investors. Also list every cost involved in running your business including business activities, investments, and any financing. Price your product to cover the costs so you don’t lose money on every transaction.
Income statement: Your income statement, also known as a profit and loss statement, tracks revenue streams and expenses over time. You need to track all expenses including materials, production, shipping, merchandising, marketing, advertising, staffing, and tracking payment. My best advice is to pay yourself for every task you do so that as the business grows and you delegate more you can afford to pay someone else to do those tasks. Use this sample income statement to itemize all your revenue and the expenses it takes to run your business. Is your business as profitable as you want it to be? If not, you can dig deep into each product/service you provide to discover what is holding you back!
Balance sheet: In addition to a cash flow statement and income statement, you should also have a balance sheet because it is the quickest indicator of the value of your business today. Your balance sheet is an “at-a-glance” view of your current assets and liabilities. You communicate with investors and creditors about the financial health of your company by sharing your balance sheet.
Whether you choose to set up your financial tracking on your own or with the help of an accountant, exposing your financial information can feel intimidating. Still, it is vital to take the time to know your business finances intimately so that you can grow in confidence and profitability.
When do you think a business should start showing profitability? Tell us in the comments!
Cathy Lindemann is President of Evolution Creative Solutions and on the Steering Committee for WBENC Ohio River Valley and Founding Member of WISe Wellness Guild.
Book a Small Business Coaching session with Cathy here
Cathy specializes in helping small businesses become "unstuck" for immediate growth and supporting strategic growth through WISe partnerships. Follow Cathy on Instagram @lindemanncathy, or connect with Cathy on LinkedIn at linkedin.com/in/cathylindemann.